Mondragon: What relevance for US cooperative development

A recent weeklong conference in Sonoma, California – The Economics of Peace – featured a day devoted to lectures and workshops on the cooperatives associated with the Mondragon Cooperative Corporation (MCC). This event marks the third occasion in the last six months where representatives from the MCC, located in the Basque region of Spain, appeared in the US. Previously both Cleveland and Detroit hosted discussions with the MCC. While US developers of worker cooperatives have toured the Mondragon complex since the 80’s, these recent visits are noteworthy as a first for the MCC.  

In each case the MCC representatives were returning a visit from a US group, so we can’t presume that the frequency of visits will be maintained. Nonetheless the increased public exposure to the cooperative enterprises founded over 50 years ago in the city of Mondragon is significant. The raised profile of Mondragon in the US prompts some thoughts of MCC’s role within the worker community. I am hoping that the following comments, from someone with only a tangential relationship to co-op development (I consider myself an activist, not a “developer”) will generate a discussion about the future of worker cooperatives in a world that increasingly shows signs of complete collapse.  

But let me begin noting the amazing success of an experiment (the term the MCC uses) begun by a poor parish priest over sixty years ago. Today, the MCC is a complex worth 24 billion dollars and employing 100,000 in 120 enterprises all over the globe. It comprises factories, banks, insurance agencies and a network of retail stores throughout Spain. Globally the MCC invests in industries located all over Europe, Latin America and Asia.  

Mondragon obviously is embedded in the global capitalist order. It functions with that reality everyday. Its decisions are based on the proverbial bottom-line. Furthermore, it operates in countries seemingly without concern for the factors many liberals in this country believe should influence investment decisions. Mondragon invests in developing countries to compete on the level of the capitalists. For instance, Mondragon has manufacturing facilities in Mexico so that they can take advantage of NAFTA to import their home appliances into the States.  

The critique of globalism can’t escape being applied to Mondragon. Nor can that critique be ignored by those who laud the spectacular growth of the MCC as proof that worker-ownership works!  

To close the book on Mondragon based on their ability to play the game of neo-liberalism would be a mistake. US visitors who over the years have not tempered their criticisms of the MCC, especially their overseas operations, have returned home with insights garnered from the daily practices of the cooperatives.  

Before venturing into the more positive aspects of the Mondragon experiment, it is only fair to record how Mondragon responds to their critics’ concerns that cooperative principles are flaunted.  

In the early 90’s Mondragon learned that a large French retailer planned to open in Spain Wal-Mart-size “big box” stores. Since Mondragon has a large domestic appliance presence in Spain, to loose retail outlets to a foreign operator threatened their national distribution. To prevent these foreign acquisitions, Mondragon began buying up various retails chains throughout Spain. For Mondragon to expand beyond its manufacturing base, was a major corporate decision. And it was also significant for the MCC to absorb thousands of employees throughout Spain in traditional capitalist enterprises.  

About ten years ago co-op membership was opened up to these new retail workers on a limited basis to ease the transition into the corporation, but the job growth of these retail outlets was outstripping the rate at which membership was attained.So early this year Mondragon decided to open up membership to all of the 40,000 retail employees. This appears to be a successful policy.  

Outside of Spain the acquisitions are usually established firms purchased for strategic reasons. For example Mondragon manufactures the machinery that makes solar panels, but does not fabricate the panels themselves. So for instance in China, the largest factory for solar panels uses their machinery and so it makes sense for the MCC to purchase a Chinese manufacturer to serve as a supplier for these machines using Mondragon’s designs. Similar practices occur all over the globe. The MCC doesn’t buy these firms to spread cooperative principles, but to invest in them for their larger economic viability. In some cases these firms may not be profitable, but with new, proprietary inputs Mondragon expects that over a period of time they will be. Mondragon argues therefore that if the firm is not profitable when purchased why would the workers want to buy in?  

In other cases Mondragon might find itself in a country with no legal avenue for creating a worker-cooperative, or where the government actively opposes such a development. That said, where Mondragon has succeeded in establishing a profitable firm and where the workers, the legal system and the government are all favorable to the development of cooperatives, there can be no reason for resistance to cooperative transformation.

It certainly cannot be said that Mondragon would be unable to handle such a transition. Along with the huge manufacturing sector, Mondragon facilitates financial services all over Spain and beyond. It also supports a development agency and a university. The MCC’s bank aids the development agency to guide both new and established firms to succeed. These efforts in turn are supported by the research conducted through the university. And behind the entire complex are the principles of Father Arizmendi. Together these resources provide all the knowledge that is needed to develop cooperatives from traditional capitalist firms.  

The reason so many visitors pilgrimage to the Basque country every year lies precisely here. Sophisticated research and decades of proven practices support the assertion that the worker-centered basis of the cooperatives knows no language or cultural barriers. This explains why, in the last years of his life, Cesar Chavez began speculating on the creation of cooperatives based on the Mondragon model. And it is the reason, that recently, economic developers from the America Midwest have been eager to adopt some of the lessons of Mondragon’s history.  

But how does Mondragon translate to America? How can a huge cooperative complex based in a society built on strong communal ties find nurturing soil in a country built upon hyper-individualism?  

In Ohio for decades a small group based at Kent State has been slowly building a network, now 80 strong, of small businesses where employees gain access to shares in their companies through the Employee Stock Option Plan (ESOP) system. And these ESOPs as a whole are surviving better during this depression than traditional companies.  

When economic developers in Cleveland, with a fund $2.5 billion from various sources, began planning a project to bring jobs to a destitute neighborhood they turned to the founders of this network for expertise. The ESOPs in the network however where created from existing companies, not start-ups. It was the familiarity with Mondragon, through previous visits there, that motivated the Ohio developers to create co-ops as stable enterprises to retain and expand capital in the community. The first project, a large commercial laundry, is up and running and two other cooperatives are in the process of forming: a solar installation service and an industrial-size hydroponics greenhouse.  

In another endeavor, in an underserved area of Detroit, a motivated, diverse group consisting of non-profits, government and unions are investigating the development of a worker cooperative grocery outlet. And in rural Wisconsin a community involved in the creation of value-added agricultural products is researching a cooperative model using Mondragon as a reference.  

The common element with all these plans rests upon creating community wealth with community support. Quietly, without a lot of bravado, the basis for a new way of answering economic needs may be gaining traction. Yet while strides are taken to plant the economic feet of a community on firmer ground than old-style government dead-end programs, one wonders if not at least one foot isn’t stuck in the muck of the old system of capitalism.  

What’s significant about the history of Mondragon and, in its structure, what is relevant to the US situation? A brief review of these questions will hopefully clarify my perspective on community economic developments in the US and the reliance upon entrepreneurship as an organizing tool.  

At Mondragon worker participation underlies the entire structure since the whole edifice is founded on the votes of the workers in general assembly. The workers elect the management of the co-ops. That’s basic. Of course in some cases this may be a pro forma process. It is obvious that the top echelons of management are engineers for instance, not janitors. But if the entire system resembled the old Soviet bloc of obedient citizenship periodically endorsing the ruling clique, the structure wouldn’t hold. If for no other reason than to maintain industrial harmony the democratic nature of the cooperatives must be monitored and encouraged. For example, with the rise of feminism more women have taken on engineering training and have subsequently gained greater access to management positions. Women make up 41% of the work force of the MCC and 31 % are in elected positions of authority.  

Further, at Mondragon the members of the co-ops are somewhat insulated from the worst excesses of capitalist volatility. Given the crisis-prone nature of capitalism, firms prosper and fail periodically and the usual victims, the workers, must face the consequences. But during this depression the worker-members agreed to wage cuts and reduced hours in order to spread the misery more equitably. The non-member workforce, which numbers approximately 15% of the total, faced lay-offs as in any capitalist firm. To be clear about this, Mondragon hires employees to meet its labor requirements with the full understanding that these hires are not eligible for membership unless their jobs can be secured as economically viable over the long term. In this sense Mondragon deviates somewhat from the expected co-op practice and this may explain why unions are represented in the enterprises.  

I believe that the social context for membership in Mondragon stretches beyond an individualistic perspective associated in this country with small business entrepreneurship. The in-depth communitarianism that exists in a society where your job and your neighbors’, the local grocery store in your community, the bank, and your pension plan and those of your friends, are all tied to one large democratically run establishment cannot be easily comprehended by Americans. Something closer to stewardship than proprietorship prevails at Mondragon and I don’t believe that this perspective has been incorporated into organizing American worker cooperatives.  

The early cooperative movement reflected values opposed to the dominant economic necessities of capitalism. Historically the cooperative movement rose from communities of solidarity - of workers who banded together to sustain their communities in the face of daily oppression both on the job and off. And the workers expressed these values as members in a collaborative process to purchase foodstuffs, create insurance plans to sustain widows and children and, when they faced lockouts, production cooperatives, using their skills to manage their own workshops in defiance of the bosses.  

Today as society increasingly atomizes social relations, the opportunity to collaborate has evaporated from our lives. We are isolated ciphers jammed together in oppressive environments and expected to perform as best we can with a room full of strangers who share nothing more than their alienation.  

It should come as no surprise that years of employment under these circumstances deprives individuals of any experience of solidarity. The closest thing to collaborative behavior may come with Church membership or volunteering, but these are often fleeting, not substantial and ongoing activities.  

Every cooperative faces the consequences of this isolated existence whenever a recruit is hired to be on a membership track. No amount of introductory material can prepare a person for the level of interpersonal relations that contribute to the smooth functioning of a cooperative enterprise. “On-the-job training” is essential not only for learning job skills, but also for acquiring the essential empathic skills that are under utilized in our hyper-individualized society.  

How best to introduce the idea of taking on responsibilities for a collective endeavor to people who in their working lives only experienced order-taking and obedience? Michael Moore in his new film Capitalism: A Love Story talks about extending democracy from the political arena to the economic one. Those who have read some labor history, or political philosophy, will be familiar with his approach. I believe that a democratic ethos exists and when stirred by outrage over injustice, or stirred by a challenge to our nobility, it manifests itself.  

Of course “democracy” faces attacks daily from those who wish to eviscerate the content of the word to mean nothing more than simply quadrennial trips to the voting booth. However, whenever pompous, over-reaching governmental authorities attack their critics as “ultra-democratic” they appear foolish and fail miserably to avoid ridicule. While those who wish to practice democracy often lack a playing field of any consequence, nonetheless the catastrophe we face of triple crises – in resource depletion, the economy and human rights – can only be addressed by extending popular control over all levers of power.  

Gleanings from the mass media are pretty slim when it comes to gaining information about arenas of revolt, but only cave dwellers would be dismissive of the portents for change that have been appearing lately.  

I will end with one story that Michael Moore tells about his worried anticipation when the section from Capitalism: A Love Story on worker cooperatives was shown at the AFL-CIO convention. He braced for, at best, a bitter silence and, at worst, a vocal guffawing when a hall full of union members saw workers in his film expressing their satisfaction with jobs they controlled through their cooperative, democratic structures. The response from the audience was rousingly positive. Loud applause and cheers. Moore was astonished. Imagine, union members endorsing workplace democracy! Has the world changed? Are we who agitate for worker cooperatives keeping up with those changes? That’s our challenge.  

Bernard Marszalek  

info@jasecon.org  

October 27, 2009